What is the Sugar Tax?

The Minister of Finance announced in February 2016 the decision to introduce a tax on sugar-sweetened beverages (SSBs) that will come into effect in April 2017. The stated purpose of the proposed tax is to help reduce excessive sugar intake, based on a concern about obesity caused by consuming too much sugar.

Government’s rationale for the Sugar Tax

A Policy Paper released by government in July 2016 outlined the proposed sugar tax. In the paper they argue:

“Obesity is a global epidemic and a major risk factor linked to the growing burden of non-communicable diseases (NCDs) including heart diseases, type 2 diabetes and some forms of cancers. NCDs are the leading causes of mortality globally, resulting in more deaths than all other causes combined, and the world’s low and middle-income populations are the most affected. The problem of obesity has grown over the past 30 years in South Africa resulting in the country being ranked the most obese country in sub-Saharan Africa.”

It therefore makes the case that in the interest of public health government should place a sugar tax on soft drinks (Coca-Cola, Fanta, Sprite etc) and energy drinks (Red Bull, Play etc).

The report argues that soft drinks are consumed by many young children, creating an unhealthy habit that stays with them. It argues that the excessive consumption of sugar from carbonated drinks causes early onset type 2 diabetes and obesity. This in turn requires chronic care over the child’s lifetime, increasing the cost of public healthcare.

The report recommends that:

Government should use fiscal policy intervention as a way to influence consumers’ purchasing behaviour.

Soft drinks have high sugar content but no nutritional value and therefore should be taxed.

The tax would be in the region of R2.29 per litre of sugar-sweetened beverage, or R0.0229 (i.e. 2.29 cents).

The tax would only apply to soft drinks and energy drinks and not to 100 per cent fruit juice and unsweetened milk and milk products.

Critical views of the Sugar Tax

Below are quotes by those in the Media and Civil Society criticizing the proposed Sugar Tax;

“The public may well come to resent the nanny state’s interference in a private matter they don’t perceive to be a serious problem, using taxes that achieve hardly any measurable outcome other than milking them for money to pour into Treasury coffers.” – Daily Maverick

“The beverage industry was planning to add 60,000 jobs over the next five years by investing in around 30,000 new outlets, thereby committing to the country’s economic growth. However, the reduction in consumption due to the added tax could mean the loss of these potential new job openings.” – Forbes

“Coca-Cola Beverages Africa, the bottling joint venture between the U.S. soft-drink maker and brewer SABMiller Plc, may close South African plants and see profit in the country more than halve if the government pushes ahead with a proposed sugar tax.” – Bloomberg

“as the Treasury is well aware, an SSB tax will cost it very little, compared to other possible interventions. So what it really means is that the tax is the cheapest way the government can purport to tackle the obesity problem, while bringing in useful amounts (R10.5bn or more) of additional revenue at the expense of hard-pressed consumers.” – Institute of Race Relations

Summary

Is the Sugar Tax a legitimate attempt to improve the health of South Africans, or a cynical attempt to increase VAT for a government needing to boost tax revenue? Ineng hopes to bring together small business owners and policy analysts in the coming months to tackle this and other tax-related issues.